What are Cosigned Car Loans?

Cosigned car loans are lending tools that enable people with credit issue, obtain the financing they need for a vehicle. This type of loan is offered by a variety of lenders. The risk can be high for the person providing the co-signature for a loan.

What Cosigning Means

Cosigned car loans involve the buyer of a vehicle and a person who agrees to take on the loan in the case of a default. The cosigner will not have to make payments on the loan as long as it is in good standing, but will be required to take on the obligation if something happens.  The cosigner will have the car debt obligation show up on their credit report, even if he or she is not actually making the payments.

When Cosigned Car Loans Are Needed

Having a cosigner for a car loan can make obtaining financing easier for people facing certain circumstances. They include:

  • No credit – A cosigner can help a person who is just starting out obtain financing. Banks and other lenders are often hesitant to write loans to people with little or no credit. In some cases, having a cosigner can help the borrower obtain a loan or better rate.
  • Bad credit – Cosigned car loans can help people with bad credit. The car buyer appears to be stronger candidate because they have someone that guarantees the loan.

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